Traditional and Roth IRA Income Limits Raised Once Again for 2013

The charts below will show you the latest income limits that apply to the Traditional and Roth IRAs.

Contributing to an IRA is a smart move. There are two major varieties for the typical tax payer to take advantage of: Traditional or Roth. The Traditional IRA gives you a tax deduction on contributions, while the Roth IRA lets you take distributions from the account in retirement without paying taxes.

They are both excellent tools to help you build a solid portfolio enabling you to support yourself when you can no longer work. I highly recommend you use one or both to help you save for retirement today.

But there are limits (based on your income) that might affect your ability to use one of these accounts to your fullest advantage. Let’s look at each one closely.

Traditional IRA Income Limits for 2013

The IRS has chosen to limit your ability to fully deduct your contributions to a Traditional IRA based on your income. First, they split filers into two groups: those who are participating in a company retirement plan (i.e. 401K) and those who are not. Once tax payers are split into those two major categories, the IRS further refines the groups by filing status. In all cases Modified Adjusted Gross Income (MAGI) is used to define income.

If you do participate in your employers plan and…

If you file your taxes as Married Filing Jointly or as a Qualifying Widower in 2013, your income needs to be below $95,000 for you to be able to fully deduct your contributions to a Traditional IRA. If your MAGI is between $95,000 – $115,000 then you are in the “phase-out” range and the amount you can deduct starts “phasing out”. At $115,000 you are unable to deduct the contributions you make to a Traditional IRA.

If you file as Single, Head of Household, or Married Filing Separately (not living with your spouse) in 2013, your MAGI needs to be below $59,000 to completely deduct your contributions. Your phase out range is between $59,000 and $69,000.

If you file as Married Filing Separately (living with your spouse) in 2013, your MAGI needs to be $0. Your phase out range is between $0 and $10,000.

If you do not participate in your employers plan and…

If you file your taxes as Married Filing Jointly (and your spouse is covered by an employer plan) in 2013, your income needs to be below $178,000 for you to be able to fully deduct your contributions to a Traditional IRA. If your MAGI is between $178,000 and $188,000 then you are in the “phase-out” range and the amount you can deduct starts “phasing out”. At $188,000 you are unable to deduct the contributions you make to a Traditional IRA.

If you file as Married Filing Separately (and your spouse is covered by an employer plan) in 2013, your MAGI needs to be $0 to completely deduct your contributions. Your phase out range is between $0 and $10,000.

If you file as anything else and your spouse (if you have one) is not covered under a plan, then have no income limits to your ability to deduct the contributions to your Traditional IRA.

Historical Traditional IRA Income Limits

For those who participate in their employers retirement plan:

Year

Married Filing Jointly or Qualifying Widower

Married Filing Separately (lived with spouse)

Single, Head of Household, or Married Filing Separately

2013

$95,000 - $115,000

$0 - $10,000

$59,000 - $69,000

2012

$92,000 - $112,000

$0 - $10,000

$58,000 - $68,000

2011

$90,000 - $110,000

$0 - $10,000

$56,000 - $66,000

2010

$89,000 - $109,000

$0 - $10,000

$56,000 - $66,000

2009

$89,000 - $109,000

$0 - $10,000

$55,000 - $65,000

2008

$85,000 - $105,000

$0 - $10,000

$53,000 - $63,000

2007

$83,000 - $103,000

$0 - $10,000

$52,000 - $62,000

2006

$75,000 - $85,000

$0 - $10,000

$50,000 - $60,000

For those who DO NOT participate in their employers retirement plan:

Year

Married Filing Jointly (Spouse Covered)

Married Filing Separately (Spouse Covered)

Single, Head of Household, Qualifying Widower, MFJ or MFS (Spouse Not Covered)

2013

$178,000 - $188,000

$0 - $10,000

No Limit

2012

$173,000 - $183,000

$0 - $10,000

No Limit

2011

$169,000 - $179,000

$0 - $10,000

No Limit

2010

$167,000 - $177,000

$0 - $10,000

No Limit

2009

$166,000 - $176,000

$0 - $10,000

No Limit

2008

$159,000 - $169,000

$0 - $10,000

No Limit

2007

$156,000 - $166,000

$0 - $10,000

No Limit

2006

No Limit

No Limit

No Limit

Now let’s take a look at the Roth IRA and associated income limits. Thankfully, they are not as complex.

Roth IRA Income Limits for 2013

The IRS tax regulations limit your ability to contribute to a Roth IRA also by using your MAGI. They have three different categories based on your filing status.

If you file your taxes as Married Filing Jointly or a Qualifying Widower in 2013 then your income (specifically, your MAGI) needs to be below $178,000 for you to be able to fully contribute to a Roth IRA. If your MAGI is between $178,000 and $188,000 then you are in the “phase-out” range and the amount you can contribute starts “phasing out”. At $188,000 you are unable to participate in the Roth IRA.

For those who file as Single, Head of Household, or Married Filing Separately (not living with your spouse) in 2013, your MAGI needs to be below $112,000 to fully contribute. Your phase out range is between $112,000 and $127,000.

Finally, for those of you who are filing Married Filing Separately (living with your spouse) in 2013, your MAGI needs to be $0. Your phase out range is between $0 and $10,000.

Historical Roth IRA Income Limits

Every year, the income limits are evaluated against inflation and incomes to determine if a change is needed. In the past five years there has only been one instance where the limit did not change for the two major categories.

Year

Married Filing Jointly or Qualifying Widower

Married Filing Separately (lived with spouse)

Single, Head of Household, or Married Filing Separately

2013

$178,000 - $188,000

$0 - $10,000

$112,000 - $127,000

2012

$173,000 - $183,000

$0 - $10,000

$110,000 - $125,000

2011

$169,000 - $179,000

$0 - $10,000

$107,000 - $122,000

2010

$167,000 - $177,000

$0 - $10,000

$105,000 - $120,000

2009

$166,000 - $176,000

$0 - $10,000

$105,000 - $120,000

2008

$159,000 - $169,000

$0 - $10,000

$101,000 - $116,000

2007

$156,000 - $166,000

$0 - $10,000

$99,000 - $114,000

2006

$150,000 - $160,000

$0 - $10,000

$95,000 - $110,000

More About MAGI and Contribution Limits

Now take that number and add back in your IRA deduction, student loan interest, tuition and fees deductions, any domestic production activities, any foreign earned income exclusions, any foreign housing deduction, any excluded qualified savings bond interest, and finally, any excluded employer-provided adoption benefits. Thanks to Jim from Financial Ducks in a Row for explaining how to determine your MAGI.

Tax saving tip: Note that 401K contributions (which is a deduction you take to get to AGI) doesn’t get added back in to determine your MAGI. Use this knowledge to your advantage. If you are close to reaching your phase-out limits then add more contributions to your 401K to drop your MAGI so that you can continue investing.

Wondering what it means to “fully contribute” to your IRA? In short, your 2013 contribution limit is $5,500 annually. Those 50 and older can tack on an additional $1,000 for a total contribution of $6,500. For more on this, see the Traditional and Roth IRA contribution limits.

Last Edited: February 5, 2013 @ 10:48 pmThe content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice. In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.

About Philip Taylor

Philip Taylor, aka "PT", is a CPA, financial writer, FinCon CEO, and husband and father of three. He created PT Money back in 2007 to share his thoughts on money and to meet others passionate about managing their finances. All the content on this blog is original, and created or edited by PT. Read more about Philip Taylor, and be sure to connect with him on Twitter, Facebook, or view the Philip Taylor+ Google profile.

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Comments

One of the cool features of the Roth IRA is that you can make a contribution for a spouses Roth IRA, even if your spouse has no earned income. As long as you have enough earned income to cover both your contribution and your spouses, you can contribute to both. That turns a $5000 contribution into $10,000 ($12,000 if you’re both 50 or older).

That can build up in a hurry, and you can withdraw all of it free of taxes after age 59.5.

The good news is that even if you exceed the income limits, there is a workaround for funding your Roth IRA. Indeed, as of last year the income limits for converting from a traditional IRA to a Roth went away, so if you earn too much, you can make a non-deductible traditional IRA contribution and then convert it to your Roth.

The good news is that even if you exceed the income limits, there is a workaround for funding your Roth IRA. Indeed, as of last year the income limits for converting from a traditional IRA to a Roth went away, so if you earn too much, you can make a non-deductible traditional IRA contribution and then convert it to your Roth.

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Disclaimer

The content of ptmoney.com is for general information purposes only and does not constitute professional advice. Visitors to ptmoney.com should not act upon the content or information without first seeking appropriate professional advice.

In accordance with the latest FTC guidelines, we declare that we have a financial relationship with every company mentioned on this site.